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Saturday, March 1, 2014

Rea v. Michaels Stores Inc.: Remand of Class Action to State Court Improper Under CAFA

In Rea v. Michaels Stores Inc., ___ F.3d ___ (2/18/14), the plaintiffs filed a wage and hour class action in state court, and the defendant removed to the district court under the Class Action Fairness Act (CAFA). The district court remanded because the plaintiffs disclaimed any recovery over $4,9999,999.99. After the US Supreme Court's decision in Standard Fire Ins. Co. v. Knowles (discussed here), the defendant again removed, and the district court again remanded, holding that the removal was untimely and that the defendant failed to demonstrate that the amount in controversy met the $5 million standard.

The defendant appealed, and the Ninth Circuit reversed, holding: 

First, the fact that the state court had certified a class did not bind the class members to the plaintiffs' earlier stipulation, nor did the fact that the certified class was smaller than the one originally contemplated it make it impossible that the amount in controversy would be under $5 million. 

Second, the defendant's second removal was not untimely. When the defendant removed the first time, the plaintiffs' stipulation re. amount in controversy was valid under Ninth Circuit precedent, and the defendant could not remove. Because the defendant removed the second time within 30 days of the Supreme Court's decision in Standard Fire, which held that such a stipulation was improper, the second removal was timely. 

Finally, because there was substantial, plausible evidence that the $5 million standard was met and no evidence to the contrary, the district court's finding that the standard was not met was clearly erroneous. 

The opinion is available here

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