Tic Toc the Croc: Watch the Removal Clock

Hollinghurst v. Lacoste USA, No. CV 10-2984 CAS (EX), 2010 WL 2630365 (C.D. Cal. Jun 28, 2010).

Remember the catchy tune of Never Smile at a Crocodile from Walt Disney’s version of Peter Pan? Remember how the crocodile had swallowed an alarm clock trying to eat the rest of Captain Hook? Well, here is a case when the crocodile should have swallowed an alarm clock because the crocodile did not keep track of time.

A District Court in California remanded this action to the state court holding that removal by the defendant, Lacoste USA, based on supplemental discovery responses was untimely because the initial complaint provided it with the information it needed to establish the jurisdictional amount. In addition, the Court found that the defendant waived its right to remove when it demurred to dismiss the class allegations–a substantial affirmative action in which defendant submitted issues for determination in state court.

The plaintiff brought a class action in state court on behalf current and former non-exempt hourly sales associates and/or stock associates of the defendant alleging that the defendant inter alia failed to pay minimum wages and wages for all time worked, and for missed rest and meal breaks in violation of California Labor Code.

The defendant was served with the plaintiff’s complaint on December 8, 2009, but the defendant removed the action to the federal court on April 21, 2010, more than five months later. The plaintiff moved to remand on the basis that the defendant’s notice of removal was untimely because it was not made within 30 days of service of plaintiff’s complaint.

The plaintiff asserted that even though the complaint was silent as to the amount in controversy, because it alleged many violations and a 1,000 person class size, the defendant had sufficient facts from the outset to ascertain that the case was removable as it could have been deduced from the face of the pleadings that the amount in controversy would have presumably met CAFA’s $5 million threshold.

The defendant responded that it did timely remove because it was not able to ascertain removability until April 12, 2010, when it received supplemental discovery responses that provided it with the information it needed to establish the jurisdictional amount. In those responses, the defendant asserted that the plaintiff set forth for the first time estimates as to how frequently she claimed the defendant violated California’s break laws and how frequently she had been made to work off-the-clock. The defendant further asserted that the plaintiff alleged for the first time in her supplemental discovery responses that class members were actually prohibited from taking meal and rest breaks, an allegation that defendant alleged was not contained in the complaint.

The District Court noted that under 28 U.S.C. §1446(b), the defendant must file the notice of removal within 30 days after being served with a complaint alleging a basis for removal. The 30 day time limit for removal starts to run from a defendant’s receipt of the initial pleading only when that pleading affirmatively reveals on its face the facts necessary for federal court jurisdiction; otherwise, the clock does not run until a defendant receives a copy of an amended pleading, motion, order or other paper from which it can determine that the case is removable. A defendant may also waive his right to remove by taking some substantial offensive or defensive action in the state court action indicating a willingness to litigate in the tribunal before filing a notice of removal with the federal court.

The Court observed that the defendant’s removal was untimely because based on the number of violations and the more than 1,000 person class size alleged in the complaint, the defendant could have reasonably concluded from the outset that the amount in controversy would exceed $5 million. While holding so, the Court rejected the defendant’s argument that it was only able to ascertain removability for the first time upon receipt of plaintiff’s discovery responses, because the new information did not reveal any additional facts that defendant needed to ensure that the amount in controversy would exceed CAFA’s $5 million threshold. Moreover, because the case still involved the same claims brought on behalf of the same putative class on the same set of facts as when the case was originally filed, the plaintiff’s discovery responses did not change the nature of the case such that a resetting of the removal clock would be warranted. Therefore, the Court found that the 30 day time period for removal began running when the complaint was first served; as such the defendant’s motion to remove was untimely.

Additionally, the Court found that the defendant waived its right to remove when it demurred to dismiss the class allegations–a substantial affirmative action in which the defendant submitted issues for determination in state court. By doing so, the defendant indicated its willingness to litigate in state court before it filed its notice of removal to federal court.