Thursday, April 30, 2015

FYI: 9th Cir Holds State Court Order Expanding Class Size to Exceed CAFA Threshold Triggers 30-Day Removal Opportunity

The US. Court of Appeals for the Ninth Circuit recently reversed a district court’s order remanding a class action to state court, holding that a second removal was proper and timely-filed 30 days after the state court entered an order that expanded the class definiton after the first removal.

 

A copy of the opinion is available at:  http://cdn.ca9.uscourts.gov/datastore/opinions/2015/04/01/15-55176.pdf

 

The plaintiff, an assistant store manager at a nationwide chain of discount retail stores, filed this action in state court in July of 2012, alleging that the employer supposedly violated the California Labor Code by denying 10-minute rest breaks to its employees.

 

As you may recall, in order for a federal court to have subject matter jurisdiction under CAFA, and among other things, the amount in controversy must exceed $5,000,000, exclusive of interest and costs, in order for a federal district court to have subject matter jurisdiction. See 28 U.S.C. § 1332(d).

 

The defendant employer removed the case in 2012 invoking jurisdiction under CAFA.  The plaintiff moved to remand the case to state court, arguing that defendant improperly went beyond the amended complaint by using a 65% violation rate, i.e., that rest breaks were not allowed in 65% of the shifts that were long enough to require a rest period, to support removal, resulting in an amount in controversy in excess of the $5,000,000 threshold. Instead, the plaintiff argued that the amended complaint was limited to a smaller class, namely, managers working shifts without another manager, and that only one-third of such shifts were worked alone, meaning that the amount in controversy was approximately $2.8 million, well under the jurisdictional minimum.

 

The district court agreed and remanded the case to state court, finding that because the plaintiff limited the putative class to employees who worked alone, the amount in controversy did not reach the CAFA jurisdictional threshold.

 

Back in state court, the plaintiff moved to certify the class of assistant store managers who worked without another assistant store manager according to defendant’s time records without another store manager scheduled to work, and who worked more than 3.5 hours.

 

The state court, however, expanded the class to include all assistant managers who did not receive breaks, regardless of whether they worked alone.

 

With this broader class defintion, the defendant employer filed a second notice of removal in June of 2014, arguing that the expanded class certified by the state court meant that at least $5,000,000 was in controversy. The plaintiff again moved to remand the case to state court, which the district court again granted, holding that the second removal was untimely because it was based on the same class definition that had been the subject of the first removal.

 

On appeal, the issue before the Ninth Circuit was whether the state court’s class certification order created a new opportunity for removal. The Court concluded that it did, and remanded the case to the district court to exercise jurisdiction under CAFA.

 

In support of its ruling, the Ninth Circuit reasoned that successive removal petitions are permitted only when there has been a relevant change of circumstances, such as when subsequent pleadings or events reveal a new and different basis for removal. The Ninth Circuit held that this includes when the pleadings are amended to create federal subject-matter jurisdiction for the first time.

 

The Ninth Circuit held that the state court’s order certifying the class expanded the amount in controversy because it included in the class employees who worked shifts without proper rest breaks, not just those who worked alone.

 

The Court found this to be indistinguishable from an order allowing the pleadings to be amended to alter the class definition, conferring CAFA jurisdiction for the first time. According to the Ninth Circuit, because a successive removal petition is clearly appropriate when the pleadings are amended, the Court found no good reason to reach a different conclusion simply because the same result was obtained through a class certification order.  

 

By certifying a broader class, the Ninth Circuit noted, the state court it increased the amount in controversy, effectively amended the complaint. Accordingly, the Ninth Circuit held that the second removal was proper.

 

Having concluded that the second removal was permissible, the Ninth Circuit found that it was also timely because the removal statute provides for two 30-day windows during which a case can be removed: (1) during the first 30 days after the defendant receives the initial pleading, or (2) during the first 30 days after the defendant receives “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.” 28 U.S.C. § 1446(b).

 

The Ninth Circuit held that the second window of opportunity to remove (i.e., 30 days after a defendant receives an amended pleading, motion, order or other paper from which it can be ascertained that the case has become removable), was triggered by the state court’s class certification order, not the amended complaint.

 

Beause the defendant employer filed the second removal within 30 days after the class certification order, the Ninth Circuit held that the removal was timely. Accordingly, the Court reversed and remanded the case to the district court, with instructions to exercise jurisdiction over the case under CAFA.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 493-0874
Fax: (312) 284-4751
Email: rwutscher@MauriceWutscher.com

 

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Wednesday, April 29, 2015

FYI: Fla App Ct (2nd DCA) Reverses Foreclosure Judgment Due to Inadequate Proof of Amount Due, But Remands Without Involuntary Dismissal

The District Court of Appeal of Florida, Second District, recently reversed a final judgment of foreclosure, holding that the mortgagee failed to properly establish the amount of its damages. 

 

However, the Appellate Court further held that because the borrower failed to move for dismissal at the close of evidence, the proper remedy was reversal and remand, rather than involuntary dismissal. 

 

A copy of the opinion is available at: Link to Opinion

 

A mortgagee filed a foreclosure action against the borrowers in early 2009.  Ultimately, the case was tried in November of 2013.  It was undisputed at trial that the mortgagee had standing as the holder of the note and mortgage, and that the borrowers defaulted under the note. 

 

At trial, the mortgagee’s witness, an employee of its servicer, introduced into evidence the servicer’s power of attorney between it and the mortgagee, its breach and acceleration notices to the borrowers, and the loan payment history. The mortgagee’s witness testified that the servicer’s loan payment history “comported” with the amounts listed on the proposed final judgment of foreclosure. 

 

On cross, however, the mortgagee’s witness admitted that he was not aware of the mortgagee’s actual accounting procedures.  The witness also failed to testify as to the amount of indebtedness, or how to read and understand the loan history evidence in order to calculate the amount due.  At the close of evidence, the borrowers “moved to have [the mortgagee’s witness’s] testimony stricken as unreliable.”  Notably, however, the borrowers did not move for involuntary dismissal or for a directed verdict. 

 

The borrower’s motion was denied and the trial court entered the final judgment of foreclosure that was proposed by the mortgagee.  The borrowers appealed.  On appeal, the borrowers argued that “there was no evidence of the damages included in the final judgment and that [the mortgagee’s] witness merely affirmed that the numbers in the proposed final judgment were correct without elaboration or explanation.”  The Appellate Court agreed, noting that the payment history “consisted of twenty-six pages of coded data entries with no final totals,” and that “[t]here was no testimony explaining these documents or the figures in them, nor was there testimony as to the amount of indebtedness.” 

 

Thus, the Appellate Court concluded that the available evidence did not allow the trial court to properly determine that the figures in the mortgagee’s proposed final judgment were accurate.   The Appellate Court also found that there had been no evidence provided for the amount of attorneys’ fees and court costs also awarded by the trial court.  Notably, the mortgagee’s counsel failed to file its fee and costs affidavit prior to trial as required.  However, the Appellate Court declined to instruct the trial court to involuntarily dismiss the foreclosure action with prejudice.  The borrowers sought such relief, yet the appellate court found that they had failed to move for directed verdict at the close of the evidence.

 

The Appellate Court rejected the mortgagee’s attempt to introduce the original note and mortgage into evidence, ruling that these documents were to be filed on record with the clerk prior to entry of judgment - rather than admitted into evidence - pursuant to Deutsche Bank Nat’l Trust Co. v. Huber, 137 So. 3d 562, 564 (Fla. 4th DCA 2014).  While not specifically stated by the Appellate Court in its opinion, it does appear that the mortgagee’s counsel did so. 

 

In sum, the Appellate Court determined that the mortgagee failed to properly introduce evidence of the amount of the borrowers’ indebtedness.  The Appellate Court also held that the mortgagee’s witness, an employee of its servicer, was not able to reliably testify as to the mortgagee’s accounting practices. 

 

As such, it concluded that the lack of evidence as to damages required reversal.  That said, it specifically instructed the trial court that the foreclosure was not subject to involuntary dismissal because the borrowers’ had failed to move for a directed verdict at the close of evidence at trial.

 

Accordingly, the Appellate Court reversed the trial court’s final judgment of foreclosure, and remanded the action for further proceedings consistent with its opinion.  

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 493-0874
Fax: (312) 284-4751
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

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Sunday, April 26, 2015

FYI: 2nd Cir Confirms Defendant May Remove State Action to Fed Ct Before Being Served With Process

The U.S. Court of Appeals for the Second Circuit recently held that a defendant may remove a state court action to federal court before being formally served with process.

 

A copy of the opinion is available at: http://media.ca1.uscourts.gov/pdf.opinions/13-2543P-01A.pdf

 

As you may recall, the United States Supreme Court had previously ruled that a defendant is not required to remove until the defendant has been served, but had never clarified whether removal could occur before service.

 

The Second Circuit analyzed the statutory text of the applicable statute, 28 U.S.C. § 1446(b)(1), as well as its legislative history, concluding that service of process is, with one exception not applicable to the case at bar, not a prerequisite for removal, and a defendant may remove a state court action to federal court at any time after the lawsuit is filed, but before the statutory deadline for removal expires.

 

Under 28 U.S.C. § 1446(b)(1), a defendant may remove a pending action from state to federal court at two points in time – i.e., the shorter of either within 30 days after receiving the initial pleading or, alternatively, within 30 days after being served with a summons.

 

Rejecting the plaintiff’s argument that removal is not allowed before a defendant has been served, the Court reasoned that by using the words “within 30 days after,” Congress intended to fix the point in time when a defendant’s ability to remove expires, not prohibit a defendant from removing before having been formally served and the 30-day period begins to run.

 

Because the defendant in this case was not precluded from removing before receiving service, the Second Circuit affirmed the judgment of the district court.

 

 

 

Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@mwbllp.com

 

Admitted to practice law in Illinois

 

 

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