Shanna Kuxhausen v. Bmw Financial Services Na Llc , 707 F.3d 1136 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SHANNA LEE KUXHAUSEN , No. 12-57330
individually and on behalf of all
others similarly situated, D.C. No.
Plaintiff-Appellee, 8:12-cv-00366-
AG-JPR
v.
BMW FINANCIAL SERVICES NA OPINION
LLC, a Delaware limited liability
company,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
Andrew J. Guilford, District Judge, Presiding
Argued and Submitted
February 6, 2013—Pasadena, California
Filed February 25, 2013
Before: Diarmuid F. O’Scannlain, Stephen S. Trott,
and Richard R. Clifton, Circuit Judges.
Opinion by Judge O’Scannlain
2 KUXHAUSEN V . BMW FINANCIAL SERVICES
SUMMARY*
Class Action Fairness Act (CAFA)
The panel reversed the district court’s remand to state
court of plaintiff’s proposed class action involving a BMW
California automobile dealership.
Plaintiff alleged that defendant’s removal was untimely
because it was filed more than thirty days after the filing of
the original state complaint. The panel held that because the
amount in controversy was not sufficiently stated by the
initial pleading, plaintiff had not pled all the facts necessary
for diversity jurisdiction under the Class Action Fairness Act,
and therefore the removal clock under Section 1446(b) was
not triggered. The panel noted that nothing in plaintiff’s
complaint indicated the value, even as an approximation, of
other class members’ vehicle financing contracts, and BMW
was not obligated to supply information which plaintiff had
omitted.
The panel further held that in light of its conclusion that
BMW timely removed under Section 1446(b), it had no
occasion to decide whether to join other circuits in
recognizing a “revival exception,” which according to BMW
gave it another thirty days to remove when plaintiff
expanded her suit from one strictly against a Southern
California dealership to one against all California-BMW
dealerships.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
KUXHAUSEN V . BMW FINANCIAL SERVICES 3
COUNSEL
Michael J. Hassen, Jeffer Mangels Butler & Mitchell LLP,
San Francisco, California, for Defendant-Appellant.
Christopher P. Barry (argued), Hallen D. Rosner and Angela
J. Patrick, Rosner, Barry & Babbitt, LLP, San Diego,
California, for Plaintiff-Appellee.
OPINION
O’SCANNLAIN, Circuit Judge:
We must decide whether the defendant timely removed
this proposed class action involving a California automobile
dealership to federal court.
I
A
Seeking to trade in her BMW sedan for a larger model,
Shanna Kuxhausen visited Crevier Motors in Irvine,
California. A salesperson for the dealership interested her in
a BMW X3 sports utility vehicle (SUV). After learning about
the SUV’s features and taking a test drive, Kuxhausen and
Crevier worked out the preliminary financing details.
Kuxhausen then signed a Retail Installment Sale Contract
(RISC or “contract”), which structured her purchase over a
sixty-month term. In the “Itemization of the Amount
Financed Section” of the RISC appeared the notation “N/A”
(not applicable) on a line designated for registration and
titling fees. On the reverse side of the RISC was, allegedly
4 KUXHAUSEN V . BMW FINANCIAL SERVICES
unbeknownst to Kuxhausen, an agreement to arbitrate all
disputes.
Kuxhausen took the SUV home. Around January 6, 2009,
Crevier telephoned Kuxhausen with the news that because it
had failed to obtain her financing, she would need either to
return her purchase or make a down payment as part of a new
financing deal. A few days later, she returned to the
dealership, rescinded her RISC, and executed a new one. The
new RISC had a top line of $52,309.13, and the same “N/A”
notation and agreement to arbitrate as the original. Although
executed in January, the new RISC was dated December 30,
2008—the date of her original contract. This time financing
was successful, and sometime later Crevier transferred
Kuxhausen’s note to BMW Financial Services (“BMW”), a
Delaware Limited Liability Corporation with its principal
place of business in Ohio.
B
On August 30, 2011, Kuxhausen filed a class action
complaint in Orange County Superior Court against Crevier
and BMW as assignee and holder in due course of RISCs
issued by the dealership. The complaint asserted ten
California causes of action, including alleged violations of the
Consumer Legal Remedies Act (CLRA), Cal. Civ. Code
§ 1750 et seq., and the Automobile Sales Finance Act, id.§ 2981, et seq. The complaint proposed two class actions,
each comprising Crevier customers who had financed their
vehicles with an RISC over the last four years. Class One
was composed of customers with backdated RISCs that
included allegedly unconscionable arbitration clauses. Class
Two covered customers whose RISCs “falsely state[d] [that]
registration transfer, and/or titling fees[,] were ‘not
KUXHAUSEN V . BMW FINANCIAL SERVICES 5
applicable’ to their purchase.” Kuxhausen, although not
specifying a total sum for class-wide damages, sought
“statutory damages of up to $1,000 per consumer” and $5,000
for senior-citizen consumers under the CLRA. She also
sought “restitution and/or rescission of any RISC entered into
by any Class Member.”
The case proceeded apace in Superior Court with BMW
unsuccessfully attempting to compel arbitration. In a Case
Management Conference Statement dated January 20, 2012,
Kuxhausen stated that she “may amend to plead a separate
class on behalf of all California consumers whose contracts
were assigned to BMW Financial, regardless of the selling
dealership.”
On February 9, 2012, Kuxhausen filed a First Amended
Complaint along those lines; a new group of all California-
BMW purchasers whose RISCs had failed to disclose
registration or titling fees was added as a third class.
Invoking the diversity jurisdiction provision of the Class
Action Fairness Act of 2005 (CAFA), 28 U.S.C. § 1332(d),
BMW filed a notice of removal in the District Court for the
Central District of California on March 9, 2012. In that
notice of removal, BMW claimed that a search of its business
records had revealed that the number of RISCs in Class Three
far exceeded 100, and that “the total dollar amount of RISCs
that fall within the scope of [Kuxhausen’s] Class 3” exceeded
ten million dollars. It also claimed that, given the size of the
newly added Class Three, a minimum of $1,000 in statutory
damage per purchaser would itself cause the amount in
controversy to total more than ten million dollars.
Kuxhausen moved to remand within the prescribed
period, arguing that BMW’s March 9 removal was untimely
6 KUXHAUSEN V . BMW FINANCIAL SERVICES
since it had been more than thirty days after the original state
complaint’s August filing. The district court granted the
motion. BMW then sought leave to appeal the remand order
under CAFA, which we granted on December 27, 2012. See
28 U.S.C. § 1453(c). Consistent with Congress’s mandate,
this decision is being rendered “not later than 60 days” from
that grant. Id.II
BMW contends that its March removal was indeed timely
because the face of Kuxhausen’s original state complaint did
not contain all the facts necessary for diversity jurisdiction
under CAFA.
A
The mechanics and requirements for removal are
governed by 28 U.S.C. § 1446. Section 1446(b) “identifies
two thirty-day periods for removing a case.” Carvalho v.
Equifax Info. Servs., LLC, 629 F.3d 876, 885 (9th Cir. 2010).
“The first thirty-day removal period is triggered if the case
stated by the initial pleading is removable on its face.” Id.(internal quotation marks omitted). “The second thirty-day
removal period is triggered if the initial pleading does not
indicate that the case is removable, and the defendant receives
‘a copy of an amended pleading, motion, order or other
paper’ from which removability may first be ascertained.” Id.(quoting § 1446(b)).
The statute does not define “removable.” See Durham v.
Lockheed Martin Corp., 445 F.3d 1247, 1252 (9th Cir. 2006).
Although every complaint is either capable of being removed
or not, for the purpose of assessing timeliness we do not treat
KUXHAUSEN V . BMW FINANCIAL SERVICES 7
the concept as a strict dichotomy. Rather, some pleadings are
“indeterminate” in the sense that the face of the complaint
does not make clear whether the required jurisdictional
elements are present. Harris v. Bankers Life & Cas. Co.,
425 F.3d 689, 693 (9th Cir. 2005). To avoid saddling
defendants with the burden of investigating jurisdictional
facts, we have held that “the ground for removal must be
revealed affirmatively in the initial pleading in order for the
first thirty-day clock under § 1446(b) to begin.” Id. at 695.
Removals invoking CAFA jurisdiction are equally subject to
this rule. See, e.g., Carvalho, 629 F.3d at 886.
B
Federal jurisdiction under CAFA has three elements: (1)
there must be minimal diversity of citizenship between the
parties, (2) the proposed class must have at least 100
members and (3) the amount in controversy must “exceed[]
the sum or value of $5,000,000.”1 See 28 U.S.C. § 1332(d).
Although BMW concedes that the first criterion was satisfied,
it contends that the district court erred in concluding that
Kuxhausen’s original complaint revealed the requisite class
size or that the dispute concerned over five million dollars.
1
These elements are the full extent of what subject matter jurisdiction
demands. Serrano v. 180 Connect, Inc., 478 F.3d 1018, 1022 (9th Cir.
2007). Although CAFA carves out exceptions to the district court’s
exercise of jurisdiction, the obligation to raise and prove that those
exceptions apply— even the mandatory “local controversy” and “home-
state controversy” ones— rests on the party seeking remand. As a result,
we have no charge to consider those possibilities sua sponte. See id.8 KUXHAUSEN V . BMW FINANCIAL SERVICES
1
As to numerosity, we reject BMW’s contention out of
hand. BMW cites as proof of indeterminacy the fact that the
complaint stated that the “exact number” of class members
was unknown and that Kuxhausen alleged being “one of
many customers.” Yet, the first paragraph of the complaint
states that Kuxhausen is seeking to “provide remedies for
hundreds of affected consumers.” We agree with the district
court that this was enough. No investigation, “subjective
knowledge,” or “further inquiry” was necessary for BMW to
understand that “hundreds,” by definition, means at least 200.
Carvalho, 629 F.3d at 886; see Tompkins v. Basic Research
LL, No. S-08-244 LKK/DAD, 2008 WL 1808316, at *3 (E.D.
Cal. Apr. 22, 2008) (CAFA numerosity satisfied because the
allegation “a class of ‘thousands of persons’” implies “a
logical minimum of 2,000 class members”).
2
BMW next argues that the first thirty-day period did not
start because an “examination of the four corners of the
applicable pleading[]” did not reveal that the amount in
controversy exceeded five million dollars. Carvalho,
629 F.3d at 886 (quoting Harris, 425 F.3d at 694). In
deeming this element of CAFA satisfied, the district court
reasoned that, given 200 class members and given
Kuxhausen’s demand for “rescission of a vehicle contract
exceeding $50,000,” there were class-wide damages “of at
least $10,000,000.”
BMW perceives two errors. First, it suggests that Harris
and Carvalho freed defendants from the need to make this
sort of mathematic calculation. As we explain below,
KUXHAUSEN V . BMW FINANCIAL SERVICES 9
defendants need not make extrapolations or engage in
guesswork; yet the statute “requires a defendant to apply a
reasonable amount of intelligence in ascertaining
removability.” Whitaker v. Am. Telecasting, Inc., 261 F.3d
196, 206 (2d Cir. 2001). Multiplying figures clearly stated in
a complaint is an aspect of that duty. See, e.g., Carvalho,
629 F.3d at 884 (noting that the “amount in controversy was
at least $12.5 million (i.e., $25,000 times 500 potential
plaintiffs)”).2
BMW’s second challenge is more substantial. It correctly
observes that lurking in the district court’s analysis was an
implicit premise not furnished by the complaint. Nowhere in
that pleading does Kuxhausen allege the value, even as an
approximation, of other class members’ vehicle financing
contracts. Kuxhausen argues that BMW should have
consulted its business records to identify a representative
valuation, a task it did perform after receiving the amended
complaint.
2
The general rule is that the amount in controversy represents “an
estimate of the total amount in dispute, not a prospective assessment of
defendant’s liability.” Lewis v. Verizon Commc’ns, Inc., 627 F.3d 395,
400 (9th Cir. 2010). BMW has argued that the full RISC value should not
be viewed as in controversy because a customer’s rescission would
involve some accompanying offset for depreciation of their vehicle.
Citing an older precedent of ours, the Sixth Circuit has expressly
rejected that argument. See Rosen v. Chrysler Corp., 205 F.3d 918, 921
(6th Cir. 2000) (concluding that “in cases where a plaintiff seeks to
rescind a contract, the [automobile] contract’s entire value, without offset,
is the amount in controversy”) (collecting cases, including Savarese v.
Edrick Transfer & Storage, Inc., 513 F.2d 140, 142 (9th Cir. 1975)). We
need not decide whether to endorse this view, though, because even using
the full contract price as the amount in controversy, we conclude that
Kuxhausen’s original complaint was not removable on its face.
10 KUXHAUSEN V . BMW FINANCIAL SERVICES
In Harris, a non-CAFA case, the plaintiffs made a similar
demand. They argued that the defendant “should have looked
in its files within the first thirty days” to discover that a
named defendant whose presence in the suit frustrated
complete diversity of citizenship had died, and therefore
should have recognized that the case was immediately
removable under 28 U.S.C. § 1332(a). Harris, 425 F.3d at
696. Preferring a clear rule, and unwilling to embroil the
courts in inquires “into the subjective knowledge of [a]
defendant,” we declined to hold that materials outside the
complaint start the thirty-day clock. Id. at 695 (quoting
Lovern v. Gen. Motors Corp., 121 F.3d 160, 162 (4th Cir.
1997)). Applying that principle here, we conclude that BMW
was not obligated to supply information which Kuxhausen
had omitted.
However, that does not fully resolve whether the amount
in controversy was “stated by the initial pleading.” 28 U.S.C.
§ 1446(b). The district court also was influenced by the fact
that for a 200 member class, the average contract price per
vehicle needed only to exceed $25,000 in order to put greater
than five million dollars in controversy. Presumably, it
thought that sum was a plausible-enough guess for a case
involving German luxury automobiles, perhaps doubly so
since Kuxhausen’s individual vehicle contract was more than
twice that amount. The fact remains, however, that we “don’t
charge defendants with notice of removability until they’ve
received a paper that gives them enough information to
remove.” Durham, 445 F.3d at 1251. This principle helps
avoid a “Catch–22” for defendants desirous of a federal
forum. By leaving the window for removal open, it forces
plaintiffs to assume the costs associated with their own
indeterminate pleadings. That is only fair after all,
because—even under CAFA—“the burden is on the party
KUXHAUSEN V . BMW FINANCIAL SERVICES 11
removing the case from state court to show the exercise of
federal jurisdiction is appropriate.” Lewis v. Verizon
Commc’ns, Inc., 627 F.3d 395, 399 (9th Cir. 2010). Thus,
because nothing in Kuxhausen’s complaint “indicate[d] that
the amount demanded by each putative class member
exceed[ed] $25,000,” it fell short of triggering the removal
clock under Section 1446(b). Carvalho, 629 F.3d at 886.3
III
Offering an alternative basis on which to affirm the
judgment below, Kuxhausen claims that BMW’s March 9
removal was untimely because it occurred more than thirty
days after the company received a copy of an “order or other
paper” from which removability could first be ascertained.
28 U.S.C. § 1446(b)(3). This contention implicates the
second thirty-day period which enters the picture only when,
as we have concluded in this case, the original complaint does
not evidence its removability. See Carvalho, 629 F.3d at 885.
For this argument, Kuxhausen relies on two disclosures.
First, she cites her June 17, 2011, demand letter. A state
court demand letter generally can qualify as “‘other paper’
within the meaning of section 1446(b).” Carvalho, 629 F.3d
at 885. Yet, since all the other neighboring statutory terms,
“an amended pleading, motion, [or] order,” cannot logically
precede the initial pleading, we have held that “other paper”
3
It bears repeating that whether a defendant can establish that federal
jurisdiction exists and the question of when the thirty-day time period
begins are not two sides of the same coin. Thus, Kuxhausen is incorrect
in asserting that because BM W could have ventured beyond the pleadings
to demonstrate removability initially (as it did later upon receipt of the
First Amended Complaint) it was therefore obligated to do so.
12 KUXHAUSEN V . BMW FINANCIAL SERVICES
does not embrace “any document received prior to receipt of
the initial pleading.” Id. at 885–86. Because Kuxhausen’s
demand letter was provided to BMW before she initiated her
suit, it cannot trigger this thirty-day period.
Second, Kuxhausen cites her Case Management
Conference Statement from January 2012. Shortly thereafter,
the state court, orally, and then in writing, gave her
permission to file an amended complaint along those lines.
Yet, not even a draft of an amended complaint had been
produced at that point. Had BMW removed on the basis of a
not-yet-filed complaint, which may or may not ever have
materialized, “it may well have subjected itself to fees and
costs, and potentially Rule 11 sanctions, for filing a baseless
notice of removal.” Durham, 445 F.3d at 1251; see also id.
(“After Harris, we no longer require defendants to take [a]
blind leap. . . .”). At oral argument, counsel for Kuxhausen
conceded that this logic—fatal to her position—was
inescapable.
IV
As a second alternative ground for remand, Kuxhausen
argues that BMW’s failure to attach her original complaint to
its notice of removal is an infirmity warranting remand.
Section 1446(a) provides that the defendant must make a
declaration attesting to the validity of its legal and factual
assertions, as well provide a “statement of the grounds for
removal, together with a copy of all process, pleadings, and
orders served.”
The district court declined to rest on this basis and so do
we. Here, once Kuxhausen raised this objection in the district
KUXHAUSEN V . BMW FINANCIAL SERVICES 13
court, BMW identified precisely where the missing complaint
could be found in the record, and indicated that should the
court desire copies of other state documents “[d]efendants
will of course supply them.” We agree with a leading treatise
and with our sister circuits that “this de minimis procedural
defect was curable” even “after expiration of the thirty-day
removal period.” See Countryman v. Farmers Ins. Exch.,
639 F.3d 1270, 1272 (10th Cir. 2011); Walton v. Bayer Corp.,
643 F.3d 994, 999 (7th Cir. 2011); 14C Charles Alan Wright
& Arthur R. Miller, Federal Practice and Procedure § 3733
(4th ed. 2011) (explaining that “both the failure to file all the
state court papers and the failure to provide the Federal Civil
Rule 11 signature are curable in the federal court” (footnotes
omitted)).4
V
Because BMW timely removed under Section 1446(b),
we reverse the district court’s remand of Kuxhausen’s
proposed class action to Orange County Superior Court. In
light of that conclusion, we have no occasion to decide
whether to join other circuits5 in recognizing a “revival
4
As should be apparent from our discussion supra Part II, by contrast,
Section 1446(b)’s “time limit is mandatory [such that] a timely objection
to a late petition will defeat removal. . . .” Fristoe v. Reynolds Metals Co.,
615 F.2d 1209, 1212 (9th Cir. 1980) (per curiam); see also Seaton v. Jabe,
992 F.2d 79, 81 (6th Cir. 1993).
5
Compare Johnson v. Heublein Inc., 227 F.3d 236, 241–44 (5th Cir.
2000); Wilson v. Intercollegiate (Big Ten) Conference Athletic Ass’n,
668 F.2d 962, 965–67 (7th Cir. 1982), with Dunn v. Gaiam, Inc., 166 F.
Supp. 2d 1273, 1279 (C.D. Cal. 2001) (noting the dearth of case law
“applying the ‘revival exception’ to salvage an otherwise-waived statutory
right of removal,” and questioning its wisdom).
14 KUXHAUSEN V . BMW FINANCIAL SERVICES
exception,” which according to BMW gave it another thirty
days to remove when Kuxhausen expanded her suit from one
strictly against Crevier to one against all California-BMW
dealerships.
REVERSED and REMANDED.