The Interplay of the 30-day Clock and the Local Controversy Exception

Graphic Communications Local 1B Health & Welfare Fund v. CVS Caremark Corp., 2011 WL 5826687 (D. Minn. Oct. 13, 2011).

In this action, a Minnesota District Court found that remand based on the local controversy exception was not dependant of the 30–day requirement of 1447(c), and the determination on the timeliness of bringing a motion to remand was fact specific; and remanded the case to the state court.

On July 23, 2009, the plaintiffs brought a class action in the Fourth Judicial District of Hennepin County, Minnesota, alleging that since July 28, 2003, the defendants violated Minnesota Statute § 151.2 by failing to pass on savings to purchasers of consumer drugs realized by the defendant pharmacies when they dispensed a generic prescription drug versus a brand-name version of the prescription in Minnesota.

After the defendants removed the case to a federal court, the plaintiffs filed an amended complaint (“FAC”) and clarified that they were not seeking any recovery under Medicare or Medicare related programs.

The defendants then moved to dismiss the FAC arguing that the complaint failed to plead a cause of action pursuant to Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009).

After the District Court dismissed the complaint, the plaintiffs then filed a Second Amended Complaint (“SAC”).

Meanwhile, in City of Lansing, et al. v. CVS Caremark Corp., et al., 1:09–CV–788 (W.D. Mich. Dec. 1, 2009), the United States District Court, Western District of Michigan issued an order sua sponte, remanding back to the state court a case very similar to this case by class action plaintiffs who alleged Michigan pharmacies overcharged for generic prescription medications. In City of Lansing, the court rejected the interpretation of the term ‘significant’ relief of other courts including the Eleventh Circuit, that a market share analysis should be used to compare the relief sought against all defendants or to determine each defendant’s ability to pay a potential judgment.

Instead, the court interpreted that the term ‘significant’ to mean more than peripheral, having meaning, and present by design rather than mere chance. In applying this interpretation, the court concluded that the presence of the six Michigan defendants was meaningful, even if the six only represented a small percentage of the total relief sought by the plaintiffs, in that without them, some of the members of the class would have been unable to obtain relief. In addition, the court found that there was no reason to believe those six defendants were introduced into the case by chance or to defeat jurisdiction.

The day after the Michigan decision and 104 days after the notice of removal, the plaintiffs in this case filed a notice of motion to remand for lack of subject matter jurisdiction.

The District Court denied the defendants’ motion to dismiss and remanded the case to the state court.

The defendants then appealed the decision to remand to the Eighth Circuit asserting that the local controversy exception in CAFA does not divest the District Court of subject matter jurisdiction and that because plaintiffs moved to remand the matter more than 30 days after removal, the remand should have been denied pursuant to 28 U.S.C. § 1447(c).

The Eighth Circuit concluded that the local controversy exception “was not a ‘defect’ within the meaning of section 1447(c)” and thus, the 30–day filing requirement of this section did not apply to motions for remand under CAFA’s local controversy provision.

The Eighth Circuit, nevertheless, found that the motion to remand must be brought within a reasonable time, and remanded the case to the District Court to determine whether the time taken by plaintiffs to move to remand – 104 days after the notice of removal – constituted a reasonable time frame.

On remand, the District Court noted that in several cases relied upon by the parties addressing the timing of non-1447(c) remand; several factors emerged as bearing on the determination of whether such a remand was brought within a reasonable time. For example in Snapper, Inc. v. Redan, 171 F.3d 1249 (11th Cir.1999), which was cited by the Eighth Circuit in its remand decision in this matter, the Eleventh Circuit addressed a motion to remand based on a forum selection clause that was brought over 30 days after the notice of removal. There, the appellate court concluded that a remand based on a forum selection clause was not a defect in removal procedure and fell out of the 30–day requirement of 1447(c).

Regarding the timing of non-1447(c) remands, the Eleventh Circuit noted that because a forum selection clause is generally apparent from the time of removal, a reasonable time may be significantly shorter in that context than in the abstention or supplemental jurisdiction contexts. As the motion to remand was filed within 30 days after the removal, the Eleventh Circuit upheld the remand.

Another case relied by the Eighth Circuit, Kamm v. ITEX Corp., 568 F.3d 752 (9th Cir.2009), the Ninth Circuit found that a forum selection clause was not a defect in removal procedure, and therefore fell outside of the 30–day requirement of 1447(c). The District Court noted that the cases relied by the Eighth Circuit were premised on the notion that whether a non–1447(c) remand motion was brought within a reasonable time frame is dependent on when the remanding party was or should have been aware of the basis for remand. Accordingly, the District Court concluded that the timeliness depended on the particular facts of a case.

Applying these principles to this case, the District Court remarked that it was satisfied that plaintiffs and their counsel did not know that they had a reasonable basis for pursuing a remand until after the Michigan court issued its remand decision on December 1, 2009. In fact, the evidence established that plaintiffs did not believe that the CAFA local controversy exception applied to this case, even after the Michigan court raised the issue at the pretrial conference.

Unlike those cases where a party brings a motion for remand based on a forum selection clause, which presumably the parties are, or should be, aware of when the litigation commences, this Court concludes that plaintiffs did not know, nor was it readily apparent to them prior to the decision in City of Lansing issued on December 1, 2009, that they could establish make out the CAFA local controversy exception and support a motion for remand. Because the plaintiffs filed their motion to remand a day after Michigan decision was rendered, the District Court concluded that the motion to remand was not made unreasonably late.

Accordingly, the District Court remanded the case to the state court.